Wednesday, April 4, 2012

AMT to Hit Record Number of Taxpayers This Year

This is a valuable lesson on how taxes really work. The Alternative Minimum Tax (AMT) was concocted to make sure that those shifty 1 percenters don't legally wiggle out of paying their taxes. How has it worked? It's snared millions of middle class Americans into its plundering noose. The super rich never pay anyway because they have armies of tax attorneys and accountants to shield their money from taxation - it's always been that way. Of course, Congress refuses to fix this tax nightmare because, well, Congress love soaking the middle class.

The alternative minimum tax—better known by its dreaded acronym AMT—will trap more taxpayers in 2011 than at anytime in its 42 year history. An estimated 4.3 million Americans are expected to pay the AMT for the past tax year, according to the Tax Policy Center.
That will be the highest number on record—up from 605,000 in 1997, 3.9 million in 2008, and 4.2 million in 2010.
The majority of those paying the tax—originally designed to target only the highest of incomes—will be making under $200,000.
"You could say the AMT is working 'too well' because more taxpayers who don't consider themselves rich now have to pay it each year," says Jerry Zimmerman, a professor of business administration and accounting at the University of Rochester.
As the AMT catches more people, the question for many is "why me?" for a tax that was supposed to target the 'one percenters.'
The AMT has widened because the tax—unlike other taxes—has never been indexed to inflation. So as incomes have gone up, many taxpayers have been pushed into ATM tax brackets that have remained the same.